Companies Are Bad at Identifying High-Potential Employees

Executive Summary

A high-potential employee is usually in the top 5% of employees in an organization. To help these employees prepare for leadership roles in a thoughtful, efficient manner, companies often institute formal high-potential (HIPO) programs. And yet, according to new data, more than 40% of individuals in HIPO programs may not belong there. So how were these individuals chosen? Four characteristics: technical and professional expertise, taking initiative and delivering results, consistently honoring commitments, and fitting into the culture of the organization. Underperforming HIPOs were especially lacking in strategic vision and the ability to motivate others. Organizations should look for people who show signs of having these skills to fill those HIPO programs and should place less emphasis on cultural fit.

A high-potential employee is usually in the top 5% of employees in an organization. These people are thought to be the organization’s most capable, most motivated, and most likely to ascend to positions of responsibility and power. To help these employees prepare for leadership roles in a thoughtful, efficient manner, companies often institute formal high-potential (HIPO) programs.

And yet, according to our data, more than 40% of individuals in HIPO programs may not belong there. We collected information on 1,964 employees from three organizations who were designated as high potentials, measuring their leadership capability using a 360-degree assessment that consisted of feedback from their immediate manager, several peers, all direct reports, and often several other individuals who were former colleagues or who worked two levels below them. On average, each leader had been given feedback from 13 assessors. Previous work we’d done with these organizations had shown that this assessment technique was highly correlated with organizational outcomes such as employee engagement, lower turnover, and higher productivity. The higher the leader scored, the better the outcomes.

But when we looked at the participants in the HIPO programs, 12% were in their organization’s bottom quartile of leadership effectiveness. Overall, 42% were below average. That is a long way from the top 5% to which they supposedly belong.

So how were these individuals chosen? What we found was that, in all three organizations, there were four characteristics that these individuals possessed:

Technical and professional expertise. It is often said that the person most likely to be promoted is the best engineer, chemist, programmer, or accountant. Having deep knowledge and expertise goes a long way in terms of getting a person noticed and valued. And it’s true that technical expertise does matter for managers. However, it’s essential to understand that what got you invited to the party is not enough to keep you at the party. People who are skilled technically but lack excellent leadership capabilities need to develop those skills.

Taking initiative and delivering results. Senior leaders in an organization were willing to look beyond poor leadership skills for a person who was consistently self-motivated and productive. Perhaps this is not surprising — when we asked over 85,000 managers what was most important for their direct reports to do to be successful, their number one choice was “drive for results.” Results do matter, but sometimes a top individual contributor should stay an individual contributor and not become the boss.

Consistently honoring commitments. When they say “It will be done,” it gets done. Inevitably, this creates trust in an individual and a willingness to look past other skills that are not excellent. There is no apparent downside to this skill until a person gets promoted and they become overwhelmed with too many assignments they have committed to achieving. We find that people who lack leadership skills don’t trust direct reports enough to delegate assignments and involve others. This leaves them drowning in commitments.

Fitting in to the culture of the organization. In addition to these skills, we found that underperforming people in HIPO programs tended to emphasize a specific trait valued by their organization. One organization, for example, had culture that placed a great deal of weight on being nice. Employees who showed consideration and concern for others would occasionally be considered HIPOs even though they lacked other leadership skills. The other two organizations valued people who volunteered for new programs or initiatives. People with that attitude were rewarded by being included in the HIPO program, even when they weren’t effective in other parts of their jobs. Paying attention to what is valued in an organization can help an individual get noticed.

We also noticed that the underperforming HIPOs were especially lacking in two skills: strategic vision and ability to motivate others. When filling their HIPO programs, organizations should look for people who show signs of having these skills — which are very important as you climb the organizational ladder — and not place quite so much emphasis on things like cultural fit and individual results.

For the organization, there are several risks to filling your HIPO program with people who don’t actually possess leadership potential. Leaders may well be lulled into assuming that they have an adequate leadership pipeline when in reality they have less than half the pipeline they thought. Just as bad, the organization may be missing out on the people who would make great leaders, even if they don’t fit the stereotype of a high-potential leader.

The situation is hardly any better for the people in the HIPO program who aren’t likely to flourish in senior management roles. These people may assume that their career is on track when in reality they may have been steered in a career direction that is less than ideal for them. These misplaced members of the HIPO group were often extremely effective individual contributors, even if they weren’t equipped for a senior role. These are people the organization wants to retain (which may be another reason they’d been funneled into the HIPO program — perhaps senior management has no more imaginative way to reward top contributors). When organizations push their top contributors into management roles in which they won’t thrive, however, they are running the risk of losing a top individual contributor and demotivating the people who are now reporting to an incompetent boss — and losing them as well.

But all is not necessarily lost. The underqualified people in the HIPO program who truly do aspire to senior positions in the organization should focus on learning and practicing the leadership skills required. We strongly believe that HIPOs with leadership deficiencies can eventually develop excellent skills, but the majority of those with poor skills don’t realize their deficiency. Being part of the HIPO program masks their shortcomings. So take an honest look in the mirror at what you need to learn.

As for the managers running the HIPO program and selecting people to be in it, we suggest they be a little more careful in whom they anoint.